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Macro Analytics 02-02-13 - RIP: Our Expansionist Central State - w/Charles Hugh Smith

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Published on Feb 6, 2013

Like the sun coming up in the morning, Central State planning and expansion predictably leads to state spending exceeding the rate of the real growth of the state's economy. The US Central State has been no exception and has been relentlessly expanding faster than GDP since the 1950s with only two notable exceptions. The dot.com bubble in the late 90's and the housing bubble in the early to mid 2000s. These artifical bubbles were created by Monetary Malpractice aimed at creating desperately needed growth to support excessive spending and debt levels.

What historically kills the expansionist state beast, is when debt reaches the critical point of debt saturation. This is the point where government borrowing is so pervasive that it forces total debt to grow to enable it to leverage ever smaller growth levels of an economy captured by a debt stranglehold brought on by the expansionist central state. The structural imbalance of state expenditures and revenue leads to structural deficits. This is the situation the US presently finds itself in, and is to be fully expected, when the central state is allowed to assume a larger expansionist role. Like a cancer it will insideously and relentlessly expand unless operated on. The sooner the operation the better the chance of survival.

Unfortunately, we are in denial, as the cancer grows and the quack doctors suggest more spending. Similar to 'blood letting' by medieval doctors, the diagnosis is flawed and will only accelerate the demise of the naive and dependent patient.

THE OBSOLETE CONCEPT OF 'CENTRAL STATE'

The whole notion of a central state is now obsolete. Technology now makes this possible and growing social unrest and a Crisis of Trust will soon demand it. We can fully expect those with political power and its need for contro,l to restrict this change in every manner possible. The lifecycle of the expansionist central state is coming to a close for many natural reason. Some of these phenonomen include:

The notion of the NODE versus HUB,

The notion of HEIRARCHICAL versus RELATIONAL,

The notion of TOP DOWN versus BOTTOM UP Revenue distribution,

The notion of SECURITY versus RISK




SECURITY versus INNOVATIVE RISK TAKING

What is often forgotten is that within a capitalist system and a free society, there is a balance of risk versus security. Risk cannot be eliminated; it can only be suppressed or transferred to others. If you want growth, you must reward risk and innovation and foster a culture that accepts failure and low-intensity disorder as the norm. The public can not expect the false state promises of security without fully recognizing that it will kill risk taking, innovtion and growth and foster the crony capitalism feeding off the less risky public trough. Expansionist central states ALWAYS make promises it has no ability to deliver on without effectively 'killing the golden goose'.




It must never be forgotten, that government by its nature is parasidic. It creates no wealth and lives off the wealth creation of others through its authoritarian powers to legally confiscate and seize. This is a fact, no matter how well intentions the public perceives the governments intentions to be.

"Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government".

Nobel Laureate in Economics, Milton Friedma

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